The following are excerpts from Part B (tax proposals) of P. Chidambaram’s budget speech.
When I took over in August, 2012, I made a statement that “clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a fair mechanism for dispute resolution, and an independent judiciary will provide great assurance”.
That statement is the underlying theme of my tax proposals, both on the direct taxes side and on the indirect taxes side.
The rates of personal income tax have survived four finance ministers and four governments. The current slabs were introduced only last year. I am inclined to give some relief to the tax payers in the first bracket of Rs 2 lakh to Rs 5 lakh. Assuming an inflation rate of 10 per cent and a notional rise in the threshold exemption from Rs 2,00,000 to Rs 2,20,000, I propose to provide a tax credit of Rs 2,000 to every person who has a total income up to Rs 5 lakh and 1.8 crore tax payers are expected to benefit to the value of Rs 3,600 crore.
When I need to raise resources, who can I go to except those who are relatively well placed in society? There are 42,800 persons — let me repeat, only 42,800 persons — who admitted to a taxable income exceeding Rs 1 crore per year. I propose to impose a surcharge of 10 per cent on persons whose taxable income exceeds Rs 1 crore per year.
I also propose to increase the surcharge from 5 per cent to 10 per cent on domestic companies whose taxable income exceeds Rs 10 crore per year. In the case of foreign companies, who pay the higher rate of corporate tax, the surcharge will increase from 2 per cent to 5 per cent.
In all other cases, such as dividend distribution tax or tax on distributed income, I propose to increase the current surcharge of 5 per cent to 10 per cent. The additional surcharges will be in force for only one year, that is Financial Year 2013-14.
I believe there is a little bit of the spirit of Mr. Azim Premji in every affluent tax payer. I am confident that when I ask the relatively prosperous to bear a small burden for one year, just one year, they will do so cheerfully.
The education cess for all tax payers shall continue at 3 per cent.
In part A of my speech, I had referred to the tax benefit to the first-home buyer who takes a loan for an amount not exceeding Rs 25,00,000. I propose to allow such home buyers an additional deduction of interest of Rs 100,000 to be claimed in AY 2014-15. If the limit is not exhausted, the balance may be claimed in AY 2015-16. This deduction will be over and above the deduction of Rs 150,000 allowed for self-occupied properties under Section 24 of the income tax act.
I propose to relax the eligibility conditions of life insurance policies for persons suffering from disability or certain ailments by increasing the permissible premium rate from 10 per cent to 15 per cent of the sum assured. This relaxation shall be available in respect of policies issued on or after 1.4.2013.
Contributions made to the Central Government Health Scheme are eligible for deduction under section 80D of the income tax act. I propose to extend the same benefit to similar schemes of the central government and the state governments.
Transactions in immovable properties are usually undervalued and underreported. One-half of the transactions do not carry the PAN of the parties concerned. With a view to improve the reporting of such transactions and the taxation of capital gains, I propose to apply TDS at the rate of one per cent on the 25 value of the transfer of immovable property where the consideration exceeds Rs 50 lakhs. However, agricultural land will be exempt.
Securities Transaction Tax (STT) has a stabilising effect on transactions, although it adds to the transaction cost. Taking note of the changes and shifts in the market, I propose to make the following reductions in the rates of tax: Equity futures: from 0.017 to 0.01 per cent MF/ETF redemptions at fund counters: from 0.25 to 0.001 per cent MF/ETF purchase/sale on exchanges: from 0.1 to 0.001 per cent, only on the seller.
It is time to introduce Commodities Transaction Tax (CTT) in a limited way. Hence, I propose to levy CTT on non-agricultural commodities futures contracts at the same rate as on equity futures, that is at 0.01 per cent of the price of the trade.
Hon’ble Members are aware that the Finance Act, 2012 introduced the General Anti Avoidance Rules, for short, GAAR. An expert committee was constituted to consult stakeholders and finalise the GAAR guidelines. After careful consideration of the report, the government announced certain decisions on 14.1.2013 which were widely welcomed. I propose to incorporate those decisions in the income tax act. I propose to bring the modified provisions into effect from 1.4.2016.
The fifth Large Tax Payer Unit will be opened at Calcutta shortly.
The Direct Taxes Code (DTC) is work in progress. The standing committee on finance has submitted its report and we attach great weight to its recommendations. I shall endeavour to bring the bill back to this House before the end of the budget session.
CUSTOMS & EXCISE
To encourage manufacture of environment-friendly vehicles, I propose to extend the period of concession now available for specified parts of electric and hybrid vehicles upto 31.3.2015.
To encourage exports, I propose to reduce the duty on pre-forms of precious and semi-precious stones from 10 per cent to 2 per cent.
To encourage domestic production of set top boxes as well as value addition, I propose to increase the duty from 5 per cent to 10 per cent.
There is an affluent class in India that consumes imported luxury goods such as high-end motor vehicles, motorcycles, yachts and similar vessels. I am sure they will not mind paying a little more. Hence, I propose to increase the duty on such motor vehicles from 75 per cent to 100 per cent; on motorcycles with engine capacity of 800cc or more from 60 per cent to 75 per cent; and on yachts from 10 per cent to 25 per cent.
The baggage rules permitting eligible passengers to bring jewellery was last amended in 1991. Gold prices have risen since, and passengers have complained of harassment. Hence, I propose to raise the duty-free limit to Rs 50,000 in the case of a male passenger and Rs 100,000 in the case of a female passenger, subject to the usual conditions.
The readymade garment industry is in the throes of a crisis. There is a demand to restore the ‘zero excise duty route’ for cotton and manmade sector (spun yarn) at the yarn, fabric and garment stages. I propose to accept the demand.
I propose to totally exempt handmade carpets and textile floor coverings of coir or jute from excise duty.
As a measure of relief to the ship building industry, I propose to exempt ships and vessels from excise duty. Consequently, there will be no CVD on imported ships.
What does a finance minister turn to when he requires resources? The answer is cigarettes. I propose to increase the specific excise duty on cigarettes by about 18 per cent. Similar increases are proposed on cigars, cheroots and cigarillos.
SUVs occupy greater road and parking space. I propose to increase the excise duty on SUVs from 27 per cent to 30 per cent. However, the increase will not apply to SUVs registered as taxis.
Hit the floor
The excise duty rate on marble was fixed in 1996. Keeping in view the increase in prices of marble, I propose to increase the duty from 30 per square metre to 60 per square metre.
About 70 per cent of imported mobile phones and about 60 per cent of domestically manufactured mobile phones are priced at Rs 2,000 or below. Mobile phones enjoy a concessional excise duty of 1 per cent and I do not propose to change that in the case of low priced mobile phones. However, on mobile phones priced at more than Rs 2,000, I propose to raise the duty to 6 per cent.
I propose to include only two services which deserve to be in the negative list. They are vocational courses offered by institutes affiliated to the State Council of Vocational Training and testing activities in relation to agriculture and agricultural produce.
Last year, at the request of the film industry, full exemption of service tax was granted on copyright on cinematography. The industry has now requested to limit the benefit of exemption to films exhibited in cinema halls. I propose to accept the request.
At present, service tax does not apply to air-conditioned restaurants that do not serve liquor. The distinction is artificial, and I propose to levy service tax on all air-conditioned restaurants.
Homes and flats with a carpet area of 2,000sqft or more or of a value of Rs 1 crore or more are high-end constructions where the component of ‘service’ is greater. Hence, I propose to reduce the rate of abatement for this class of buildings from 75 per cent to 70 per cent. Existing exemptions from service tax for low-cost housing and single residential units will continue.
Add them up
My tax proposals on the direct taxes side are estimated to yield Rs 13,300 crore and on the indirect taxes side Rs 4,700 crore.
I had first mentioned the Goods and Services Tax (GST) in the budget speech for 2007-08. At that time, it was thought that GST could be brought into effect from 1.4.2010. Alas, that was not to be. However, my recent meetings state finance ministers has led me to believe that the state governments — or, at least, the overwhelming majority — are agreed that there is need for a constitutional amendment.
I hope we can take this consensus forward and bring to this House a draft bill on the constitutional amendment and a draft bill on GST.
Madam Speaker, the last day of February is another day in the life of a nation. We pause today, to reflect on the past and the future, and we shall resume our work tomorrow.
We are the 10th largest economy in the world. By 2025, we could become a $5 trillion economy, and among the top five in the world. What we will become depends on us and on the choices that we make. Swami Vivekananda, whose 150th birth anniversary we celebrate this year, told the people: “All the strength and succour you want is within yourself. Therefore, make your own future.”
As a resolute step towards that future, Madam Speaker, I commend the budget to the House.